Malé, Maldives – The latest update from the Ministry of Finance indicate that the public debt has increased to over MVR98 billion and is MVR182,943 per capita.
This is more than 113% of the total public and publicly guaranteed debt as a percentage of the GDP of Maldives.
Over MVR46 billion is External debt while domestic debt is close to MVR53 billion. This stands at 53% and 60% as a percentage of the GDP respectively.
Compared to the last quarter of 2021, the public debt has risen by MVR 4 billion from MVR94 billion in Q4 2021 to MVR98 billion in Q1 2022. The increase is due to a number of loans taken out by the government for projects and to resolve last year’s deficit.
MMA forcasts that the public debt of the government is expected to rise up to MVR103 billion by the end of 2022.
The biggest loans taken out this year include the USD100 million loan facility provided by CFSIT for budget support and the USD18 million loan provided by the Islamic Development Bank for the Greater Male’ Waste Management Improvement and Waste to Energy Project.
The budgetary central government debt is 97 percent as a percentage of the GDP while government-guaranteed debt is 16 percent as a percentage of the GDP. This is a dramatic increase compared to the recommended levels of public debt of below 60% indicated in the Public Finance Act (2006).
Such an increase in debt to an unsustainable level could pose serious challenges in the long term. The government could face difficulties in obtaining additional financing on favourable terms from external sources and the depletion of the Gross International Reserve holds a significant devaluation risk. A devaluation of the Maldivian Rufiyaa against USD will inflate the debt portfolio and increase the cost of debt service.
According to the 2022 budget, MVR5777.0 million is expected to be spent on debt servicing. Throughout the medium term, debt servicing is set to increase due to the rise in public debt in 2020 due to Covid-19, and an increase in the average interest rate in the debt portfolio. Debt servicing as a percentage of government revenue is estimated to increase to 35.1% in 2023, and decrease to 24.2% in 2024.